Caspian Drilling Company
(CDC), a joint venture between SOCAR (State Oil Company of Azerbaijan)
and Santa Fe International, was formed in October 1996 to provide
drilling services in the Caspian area. CDC currently operates
Azerbaijan's two semi-submersible drilling rigs, now named Dada
Gorgud and Istiglal.

In his role as General Manager for CDC, Shaig Bakirov has learned
firsthand about differences in the way drilling was managed during
the Soviet era and the way it is conducted today, according to
Western standards. Here he speaks about these two disparate approaches
and the sort of mentality that Azerbaijanis need to have to adapt
to the recent changes.

In 1995, the management of SOCAR decided to establish a joint
venture related to drilling services. After the tender process
in 1996, we decided that our foreign partner would be Santa Fe
International Corporation. We completely finished this process
on October 16, 1996, creating Caspian Drilling Company (CDC).

Left: Dada Gorgud drilling rig which was
upgraded by CDC.
Since then, our CDC consulting team has worked to upgrade Shelf-5,
which was finished in October 1998 and given the name Istiglal
(Independence). We've also upgraded a second rig, called Dada
Gorgud. Now both rigs operate to an international standard and
drill in water depths of 780m (2,500 ft), well TD is 7,800 meters
(25,000 ft). So far, between these two rigs, we've drilled approximately
60,000 meters, about 15 wells. As projects pick up, we plan to
be drilling subsea production wells in addition to exploration
wells.

Money Matters
Naturally, we are encountering major differences between the
drilling business of today and that of the Soviet period. It
used to be that the Oil Ministry of the USSR had two oil and
gas production divisions, offshore and onshore, which carried
the responsibility for all of the Soviet territory in the Caspian
region. Thus, the oil and drilling business in Azerbaijan was
managed by the Moscow Ministry of Oil - there was no such thing
as SOCAR.

The managers in Moscow decided how much money we could spend.
In a way, this made it easier on us, because we didn't have to
worry about questions like, "Where can I find the money?"
or "Where will I find projects?" We never had money
problems. We received money from the central bank account of
the USSR Oil Ministry.

We didn't have to concern ourselves with making money, either.
There was no incentive to increase profits - in fact, it didn't
matter if we showed a profit or not.

All of our projects were assigned, and we had to execute the
plans exactly. After considering the condition of the rig, the
expected down times and the necessary repairs, we would tell
the Oil Ministry that we would be able to drill, let's say, 30,000
meters per year. But after that, without consulting us, somebody
from Moscow would revise the plan to increase that amount to
40,000 meters per year. That's where we would run into some serious
problems.

The Soviet planners would say: "This is your plan, and these
are your commercial issues." But there was no contract,
no obligation there. Nothing. Each month we reported to the Board
of Directors on what we had done within that month. If you couldn't
fulfill the plan in one month, two months or quarterly, they
would demote you and substitute someone else. It was a normal
phenomenon.

Staying on Budget
As far as a budget, we would tell the Ministry, for example:
"For this project, we need $100." But the person who
approved the project could arbitrarily say: "No, I only
have $20. That's enough for you." There was nothing we could
do about it. Naturally, this resulted in a very poor operation.

Today, by international standards, you are never allowed to spend
more than you have in your budget. So we are very concerned about
staying within our limits. We put a great deal of effort into
planning our yearly budget and determining how much we will need
to spend.

It takes us three months to put together the budget for each
year: getting input from rig management, from the maintenance
supervisor, from the supplies manager and so on. The general,
operational and financial managers establish, review and approve
the budget before making recommendations to our company's Board
of Directors.

Importance of Azeri
During the Soviet era, all of our directives came to us in Russian.
But today, everything that comes from SOCAR is in Azeri Latin.
President Heydar Aliyev issued a decree this past year in August
(2001) that Azeri should only be written in the Latin alphabet
that was adopted in 1991, instead of the Cyrillic. I started
using the Azeri language myself in the office beginning in 1998
and I've been using the new Latin alphabet for the past five
months.

When we hire office personnel, we expect them to have excellent
English and Azeri. Knowledge of another language, such as Russian,
Turkish, French or German, is also helpful, but we consider Azeri
and English as essential.

It's not easy to find people who know both languages well. Usually,
the Azerbaijanis who have excellent English tend to be Russian
speakers. Azeri is a little difficult, especially grammatically
correct Azeri. Everybody here knows how to speak simple "street"
Azeri, but I'm talking about written, literary Azeri. We can't
send SOCAR or some other government office a crude, coarse, illiterate
letter written in street Azeri. This is the face of our company,
and we must present ourselves professionally.

Hiring Ratios
Besides hiring people who are fluent in Azeri, I also believe
we should hire a majority of Azerbaijanis. Our country has a
population of 8 million people. About 500,000 of them - roughly
5 percent - are of other nationalities, like Russians, Lesgians,
Tatars and Georgians.

Our company should maintain this same ratio: 95 percent of our
employees should be Azerbaijani, and 5 percent should be from
other nationalities. But in reality, we have 25 percent non-Azerbaijani
workers right now.

Part of the reason for this is that we kept about 75 percent
of the original crew from the Istiglal and Dada Gorgud drilling
rigs. From that 75 percent, 25 percent were non-Azerbaijanis.
So today, if a Russian leaves our company, we try to hire another
Russian. And if an Azerbaijani leaves, we prefer to hire another
Azerbaijani. We are not going to fire all of our non-Azerbaijani
workers just to achieve a 5 percent ratio.

At first, in 1996, everyone wanted to hire Russians. Someone
had told them that Russians made a better workforce than Azerbaijanis.
It was the wrong interpretation. But I've managed to change the
mind of our management. If we hire 250 local employees, that
means we are responsible for supporting 250 families, about 1,000
people. We couldn't establish a joint venture and then decide
to only support other nationalities; that would be wrong. Most
importantly, all newly hired employees should be competent no
matter which nationality they are.

Focus on Safety
During the Soviet period, we talked about safety, but there was
no real action, and no one paid attention to this matter. Today,
safety is one of our most important issues. For the first time,
we have a special training manager offshore, who covers safety
as part of each employee's training.

Before, we didn't have safety supervisors on drilling rigs. But
now we have two for each shift: a Safety Officer (a foreigner)
and a Safety Officer Assistant (a local employee). Besides buying
safety equipment, like lifeboats, life jackets and fire extinguishers,
we hold a number of safety meetings before each job or task gets
started.

Employees contribute to job safety through a special Stop Card
system. If a worker sees that somebody is doing something wrong,
he fills out a Stop Card form and places it in a special box.
Each day, the Safety Officers pick up all of the cards and read
them. If something serious comes up, they organize a special
meeting to try to rectify the problem. Following the guidelines
established by the Health Safety Environment Management System
(HSEMS), we're proud that we've been able to achieve our safety
goals.

International Standards
We need to reach international standards. As the saying goes,
"I'm not so rich to be able to afford cheap goods."
What's the point of buying a cheap shirt if you are only able
to use it for one month? The same thing applies to drilling for
oil. If we use Russian drilling bits, for example, they may be
cheaper than bits that are manufactured in the West. But we have
to change them again and again, losing valuable time when we
could be utilizing the equipment.

Here in Azerbaijan, we have three types of workers. First of
all, we have those who are highly educated but are always waiting
to be told what to do. Their mentality is always to let the managers
direct and advise them in their work.

A second category of worker is also highly educated, but is unable
to adapt to new ways of doing business. They think that their
way is best, questioning, "Why do we need international
standards? Why do we need to follow these foreigners' instructions?
I have just as much education and experience as they do."
They refuse to change their mentality.

The third type of worker is highly educated and open to change.
They have the patience to learn and are willing to admit that,
"Hey, this is new for me, I need to learn this. Here's something
I can add to the knowledge I already have." These are the
people who have the mentality to change and be open to new ways
of doing business. These are the people who will eventually replace
the expatriates.

Wealth of Experience
Shortly after our joint venture got started, we organized special
courses - English for Azerbaijanis, Azeri and Russian for foreigners.
Once a month, we tried to teach foreigners about the Azerbaijani
mentality, Azerbaijani national traditions, practices and national
trends. Our foreign managers are invited to attend Azerbaijani
national parties so that they can see Azerbaijanis in their own
settings.

In general, Azerbaijan is a good place to work. Foreigners soon
find that the Azerbaijani people are hospitable and kind. You
can't find an enemy in their faces. They're not xenophobic. Eventually
foreigners also come to understand that Azerbaijanis have the
ability to improve very quickly: to learn languages, to remember
details.

At first, the foreigners didn't realize that Azerbaijanis were
so experienced in oil. They figured that they knew all the answers.
The foreign supervisors thought: "This is a new area for
Azerbaijan. We have good knowledge and experience. These guys
are just starting out. We'll have to teach them all the time
and push them." But they had confused us with other parts
of the world.

Azerbaijan is like a school for oil business. During the Soviet
era, we were training oil workers for Siberia, Grozny, Tatarstan,
Bashkortostan, Turkmenistan and Kazakhstan - all of the oil specialists,
whether for drilling, producing or refining, came from Baku.
Now other countries are recognizing the vast experience that
Azerbaijanis have in relation to oil.

Shaig Bakirov
is General Manager of Caspian Drilling Company, a joint venture
between SOCAR and Santa Fe International Services. He has been
working in the oil industry since 1970.